Which of the following best describes the purpose of an adjusted trial balance prepared at December 31 for Wilson Trucking Company?

• A. To verify that total debits equal total credits after all adjusting entries have been made.
• B. To list only the accounts that have been closed for the period.
• C. To record all cash transactions for the year.
• D. To prepare the statement of cash flows directly.

Answer: (A)

Verified step by step guidance

1. Understand the concept of an adjusted trial balance: It is a list of all accounts and their balances after adjusting entries have been made at the end of an accounting period. Adjusting entries are necessary to ensure that revenues and expenses are recognized in the correct period.
2. Recognize the purpose of the adjusted trial balance: Its primary purpose is to verify that total debits equal total credits after adjustments, ensuring the accuracy of the accounting records before preparing financial statements.
3. Eliminate incorrect options: The adjusted trial balance does not list only closed accounts, record cash transactions, or directly prepare the statement of cash flows. These are unrelated to the purpose of the adjusted trial balance.
4. Focus on the correct option: The correct description aligns with the purpose of verifying that total debits equal total credits after adjustments, which is essential for accurate financial reporting.
5. Conclude the reasoning: The adjusted trial balance serves as a checkpoint to ensure the accounting system is balanced and ready for the preparation of financial statements, such as the income statement, balance sheet, and statement of cash flows.